Why investors of Reliance Industries should fear Reliance Jio's launch

What is good for consumers may not always benefit investors.

Mukesh Ambani, Chairman, Reliance Industries may have cheered consumers with unprecedented data and voice call offers on its telecom venture Reliance Jio, the growth prospects of RIL, experts believe, will remain under pressure.

The stock of RIL lost nearly 5 per cent in two days after the announcement of Reliance Jio's launch. 

Dharmesh Kant, Head - Retail Research, Motilal Oswal Securities also said the earnings per share of RIL will stay under pressure in the short to medium run, but the profit from telecom business may trickle down in the long haul.

"Though, the top line from telecom business will start trickling down in due course, the big concern remains on the timelines of achieving operating break-even point in context of tariff policy deployed," said Kant.

He believes RIL's large part of capital employed in telecom segment (around Rs 1.35 lakh crore) will start delivering revenues.

Meanwhile, RIL management guided that around Rs 1.10 lakh of capital expenditure done in petro chemical segment will become productive by fiscal year 2017 in phased manner.